Specialization is our strength

As a 30 years-plus semiconductor industry veteran and CEO of an established intellectual-property company, I found my attention grabbed by a recent front-page article in EE Times (Jan. 29, "IDM model to self-destruct?"). Those of us who have watched our industry evolve over the past several decades have memorized one time-consistent axiom: Increased specialization increases success in the semiconductor industry. So to those who think the IDM model may self-destruct, I say they're wrong to wor

As a 30 years-plus semiconductor industry veteran and CEO of an established intellectual-property company, I found my attention grabbed by a recent front-page article in EE Times (Jan. 29, "IDM model to self-destruct?"). Those of us who have watched our industry evolve over the past several decades have memorized one time-consistent axiom: Increased specialization increases success in the semiconductor industry. So to those who think the IDM model may self-destruct, I say they're wrong to worry.

In the 1970s, we built our own wafer fab and test equipment and developed our own proprietary EDA software. In the 1980s, we assembled and tested our products in-house. In the 1990s, we made our own wafers and did our own semiconductor process development. A decade ago, most system-on-chip houses had teams grinding out memory block compilers and I/O logic structures, even though those IP blocks were not the true differentiators of their end products.

During each of these phases, we heard comments similar to the more-recent pronouncements about changes in IDM strategy.

Pronouncements notwithstanding, this specialization has actually strengthened our industry. Semiconductor cost of ownership has been driven down continuously and exponentially over the decades. It is this relentless reduction in cost per transistor that has created the explosion we now see in every aspect of electronics, resulting in our industry's reaching revenue in excess of $250 billion last year.

The price improvements from Moore's Law are due to more than the lithography changes alone; industry specialization has been just as critical to the sharp decreases in cost per transistor. Specialization is critical to efficiency for three reasons: scale, competency and service. Scale is the most obvious benefit from specialization and is the one most often quoted when decisions are made to outsource a function. The other two are less often cited but are even more important to long-term productivity. Competency and service naturally occur when an independent organization focuses well on a single element in the semiconductor chain. We've seen this in semiconductor capital equipment, EDA software, assembly and test services, wafer foundry services and standardized semiconductor IP.

This evolution has truly been a virtuous circle. Every change has made our industry more productive, which has allowed us to provide more value to our customers. That has allowed them to increase their sales, which increases our industry sales. At $250 billion in annual sales, now serving a multitrillion-dollar electronics industry, we should be embracing this continuous evolution.

We realize there may be interim local impacts from these changes. The semiconductor universe, however, continually benefits from them. And if the semiconductor universe benefits, so do the corporations and, ultimately, the individuals in our industry.

-- Dan McCranie is president and CEO of Virage Logic (Fremont, Calif.).